Budget office says health not a long-term spending issue

Peter Martin, James Massola

Community expectations put pressure on governments: Prime Minister Tony Abbott with the Federal Member for Mayo, Jamie Briggs. Photo: AAP

The independent Parliamentary Budget Office has called into question claims health spending is spiralling out of control, noting government spending is projected to grow in line with the economy over the next decade and that health will account for only a small amount to that growth.

The PBO projected government spending would climb from $384 billion to $682 billion over the coming decade and warned that "elevated community expectations are likely to put ongoing pressure on governments to increase discretionary spending on major programs over the medium term".

The PBO report also found spending on medical benefits accounts for just 1.8 per cent of the projected growth in government spending over the next decade, while spending on public hospitals accounts for just 1.4 per cent.

In contrast, defence spending accounts for 3.2 per cent, the fourth-biggest contributor to increased government spending after the GST transfers to the states, the National Disability Insurance Scheme and the age pension.

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The disability support pension, singled out for attention in the budget, accounts for 1.1 per cent of the spending growth. The Newstart unemployment benefit, also singled out for attention, accounts for 0.3 per cent of the increased spending, while the government's proposed paid parental leave scheme accounts for 1.1 per cent of the extra spending.

The report said Australians had come to expect faster spending growth, but achieving forecasts would mean "successfully adjusting these expectations".

The figures were released on Friday as Prime Minister Tony Abbott rejected Treasury secretary Martin Parkinson's criticism it was "unfortunate that we didn't spend more time talking about tax reform and spending reform" in the context of countering complaints the budget was unfair.

Mr Abbott suggested Mr Parkinson may have been misinterpreted. "I'm not sure that's exactly what he said. He may have been interpreted that way," he said.

"Tax reform starts with scrapping the carbon tax and scrapping the mining tax, but it certainly doesn't end there, and that's why we've got a white paper on tax that we'll be publishing towards the end of next year. So, look, I think we've been doing exactly what the Treasury secretary suggests."

Ahead of parliament resuming on Tuesday, when negotiations with the Senate crossbench over contentious budget savings measures are expected to come into sharper focus, Mr Abbott said opponents of specific budget measures should "tell us what you'd do. Give us your alternative, because we have to address the issue."

Deloitte Access Economics' Chris Richardson predicted it was "do the deal time" in Canberra next week, but warned of the risks posed by Senate compromises leading to bad policy.

"The point is there will still need to be budget repair. Australians have happily accepted new spending but haven't agreed on the way to pay for it. Our eyes are bigger than our tax system can stomach," he said.

Opposition Leader Bill Shorten said Mr Parkinson's comments were a "remarkable intervention" and an admission the budget was "going the wrong way".

"He's [Mr Abbott] got his former treasurer Peter Costello saying it's been stuffed up. He's got the Australian people saying it's wrong. He's got his colleagues privately saying it's been stuffed up. But now his own senior public servant says it's not going the right way," he said.

A spokeswoman for Treasurer Joe Hockey said the PBO report confirmed the responsible nature of the actions taken in the budget to put government spending back on a sustainable trajectory.

"The report notes that, without action, many government programs would continue to grow much faster than the economy, making some of these programs unsustainable in the longer term," she said.